If you’ve ever rented a car, chances are the cost of adding insurance to your purchase sent you into sticker shock. A rental that costs just $25 per day could nearly double in price if you opt for the collision damage waiver and any other types of coverage offered at the counter. When faced with the pressure of being put on the spot, you might make a hasty decision about coverage – even if you do not fully understand how it works. Before you decide for or against rental car insurance, learn more about the coverage and whether it could benefit you after an accident.
What is a Collision Damage Waiver?
Also known as a loss damage waiver, this type of coverage is typically the most expensive at the rental counter because it completely absolves you of any financial liability if you damage the rental car. This can be beneficial after an accident since a rental company’s losses are likely to exceed the actual cash value of the vehicle. There are also administrative fees, loss of use, towing charges, and other expenses that could otherwise be billed to you without a collision and loss damage waiver.
Of course, there are usually some restrictions that could void the coverage if you violate them. Examples might include damages caused if:
- An unauthorized driver is driving
- You are engaging in reckless behavior
- You use the vehicle for commercial purposes
- You use the vehicle for criminal behavior
What If You Already Have Rental Car Coverage?
If you are renting a car, there is a good chance you already have some coverage for damages to the vehicle. If you are traveling, for example, you might find that your trip insurance offers some protection. Likewise, some personal umbrella insurance policies include provisions for rental cars, though you may be responsible for paying a self-insured retention. However, the most common sources for rental car coverage are personal auto insurance policies and credit cards.
To use your personal car insurance, you must have collision and comprehensive coverage on your policy. These two types of coverage usually require you to pay a deductible, and the value of the claim reimbursement is at the discretion of the insurance company. If the rental company disputes the amount the insurer is willing to pay, you could be charged personally for any excess damages.
Certain credit card companies will extend rental car damage protection if you use one of their cards to reserve and pay for a rented vehicle. In most cases, this coverage is secondary to your primary car insurance coverage, but it could help cover the cost of your deductible and any excess loss charged to you by your rental company.
If you are concerned about being charged out-of-pocket fees for your rental car damages, or if you do not wish to file a claim on your personal policy, the collision damage waiver could be a good choice for you next time you rent a car. We recommend contacting your credit card company and independent insurance agent to review the details in your coverage and be better informed next time you rent a vehicle.